Tech’s bad week: Blip or bubble?

Should investors be worried about the recent slump in software stocks?

Market recap

• They told you to diversify—recent market action is a good example of why.
• The unwinding of AI and crypto positions in recent weeks pulled Bitcoin down by more than 50% from its recent high at one point, and the Nasdaq by almost 6% before a Friday rebound.
• Through all that, the S&P 500 finished the week down 0.1%, while the TSX rose 1.7%.

Technology

Last week’s slump in Technology stocks has some investors feeling concerned. Before getting too worried, however, it’s important to understand a few things. For one, investors are diversifying risk away from some of the key artificial intelligence (A.I.) players with high multiples into more boring names that have lagged behind over the past few years. This does not mean that the A.I. story is gone (far from it), or that we don’t expect these stocks to do well in the long run. Rather, this is just the kind of rotation that happens naturally from time to time, even in spite of strong earnings. Importantly, the shift isn’t confined to Tech stocks; big Health Care firms, cryptocurrencies, and precious metals have also been affected, while companies that may benefit from an influx of cash from Trump’s One Big, Beautiful Bill—like U.S. regional banks and small caps—are benefitting. While there has also been some concern about A.I. companies’ capital expenditures (capex), it is worth remembering that it is leading experts at these companies that are making the evaluation that high levels of capex are required. The real distinction is between companies that can fund that capex themselves, and companies that need to go into debt to do so. Companies that pay through debt, like Oracle, have been punished, whereas companies like Google have been able to utilize their balance sheets well, and as such are perceived as less of a risky play.

Bottom line: When investors pay for a company, they’re often paying for future growth—and right now, they don’t seem to be as willing to do that. That is what’s driving the recent uncertainty in Tech.

Resources

Critical minerals have been an area of geopolitical contention for some time. Recently, however, they seem to be coming to the fore more often. In precious metals, there’s often a re-calibration that occurs if things pick up too quickly, which is what we’ve seen with gold—it has done well, and while we believe it can still move higher from here, it needed a breather. Silver, in our view, was a leverage play off of gold, so its decline was steeper. Copper is tied to the A.I. theme because of its utility in hardware manufacturing, which gives it an additional tailwind. What we don’t know at present is how the changing regulatory environment around critical minerals will affect microchip makers and other buyers down the line—though it likely will affect them in some way. Just remember: for any precious metal to consistently do well, it takes multiple stories behind it. With gold, there’s a weakening U.S. dollar, tariffs, geopolitical risks, retail investor demand, and central bank buying. That’s at least five separate stories that are driving gold prices. It doesn’t take all five for prices to move up in the long run, and it’s not surprising that prices will decline temporarily when one of the uncertainties comes off, as we saw when U.S. President Donald Trump nominated Kevin Warsh to be the next U.S. Federal Reserve (Fed) chair. Those multiple drivers are why we expect gold prices to keep moving higher.

Bottom line: While the regulatory environment and geopolitical tensions will continue to have ramifications for critical minerals, we think there are multiple reasons why gold could continue its ascent.

The Fed

Markets have had another week to digest President Trump’s nomination of Kevin Warsh as the next Fed chair, and in our view, this doesn’t significantly change the outlook for U.S. equities. It is likely that under Warsh, the Fed will tilt to a slightly more dovish stance. But ultimately, it comes down to the numbers. If we get a scenario where inflation is red hot, no one—not even the doves—will be cutting rates. On the other hand, if employment data is brutal, everyone will be cutting rates. It is only at the margins where the change is likely to make a difference. It also depends on which seat Warsh will be taking. If he simply replaces outgoing chair Jerome Powell, then that would be a net gain of one dove on the policy-making Federal Open Market Committee (FOMC). However, if they shuffle seats, then it will depend on how many hawks are ousted. While it does take some politicking to get appointed (and confirmed) to the Fed, once you’re there, it’s hard to be overtly political. The independence of the Fed is extremely important to its members, as we saw recently when past chairs sprung to its defense when its independence was threatened by the White House. Looking ahead, we continue to expect one or two interest rate cuts from the Fed this year, which should be especially beneficial for consumers and small cap companies.

Bottom line: We don’t think Kevin Warsh’s appointment drastically changes the interest rate outlook in the United States.

Positioning

For more insights on market risks and opportunities, including a video replay of my recent BMO GAM 2026 market outlook call, explore our 2026 Investment Outlook Centre .

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Originally Posted February 9, 2026 – Tech’s bad week: Blip or bubble?